Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.dmtmag.com/i/493405
6 COMMERCIAL CARRIER JOURNAL | APRIL 2015 I f you've been paying attention to any of the truck- ing industry economists over the last two years, you've heard a cadence of good news: Manufac- turing is making a steady comeback, construction and housing starts are rebounding slowly, and inventories remain near historic lows. All these indicators obviously are good news for carriers, and fleets have capitalized with stronger pricing power and the desire to expand. But a rapid growth in carrier size hasn't material- ized, thanks in large part to the driver shortage that has curtailed such expansion desires. While fleets could add power units, they couldn't find anyone to fill those seats. As it turns out, the driver shortage may not be any- thing that the trucking industry has the power to con- trol directly. John Larkin, managing director and head of Transportation Capital Markets Research for Stifel, Nicolaus and Company, told attendees at last month's Truckload Carriers Association's 77th Annual Conven- tion in Orlando that the labor force participation rate is at its lowest level since 1970. The cause, Larkin said, is a mix of baby boomers retiring, discouraged workers and lack of opportunity. Another major issue is the rapid increase of entitlement programs in the last six years. "Many trucking companies tell me that the person they are competing with for drivers isn't other carri- ers – it's the welfare state," Larkin said. "Some of that is the function of the social welfare net that some people find it more desirable to sit on the couch and max out on welfare payments, food stamps and unemployment benefits rather than engage in an honorable profession like trucking." While the unemployment rate in the United States sits at 5.5 percent, well below the 10 percent it reached in October 2009 during the Great Recession, Larkin said when you factor in the underemployed – defined as part-time workers who would prefer a full-time job and overqual- ified workers accepting menial jobs – the true unem- ployment rate is roughly 11 percent. Noting that health care and the leisure-hospitality industries have the strongest job growth going back to August 2008, other industries such as construction and manufacturing have suffered. Larkin said there are about 2 million blue-collar jobs available in the United States. "The reality is many people that are unemployed can't qualify for blue-collar jobs because they can't pass a drug test or meet other minimum criteria," Larkin said. "It isn't a trucking-only problem that we have in the United States. The jobs are out there." Larkin added that during the Great Recession, 22 per- cent of the jobs lost were low-paying jobs, but as we've recovered, 44 percent of new job creation are lower- paying low-benefit jobs. If some estimates hold true that the trucking industry will face a mammoth shortage of 250,000 drivers by 2020, the problem only is exacerbated. However, that scenario should create a positive pricing environment. Stifel analysts currently project a 3 to 5 percent increase in freight rates this year overall. A myriad of regula- tory pressures – including hours-of-service changes, the electronic log mandate, Compliance Safety Accountability, drug testing and increased driver training requirements – could create the "mother of all capacity crunches" some- time between 2017 and 2019, Larkin said, adding, "That could be exciting for [carriers]." Constrained capacity could be so bad, however, that Larkin said it could affect the growth of the overall U.S. economy – a scenario he calls "worrisome." If trucking can't solve the driver shortage on its own and the problem reaches those predicted heights – and likely leads to higher consumer prices and slower U.S. gross domestic product growth – perhaps Congress fi- nally will be forced to address some longstanding issues facing the industry, including truck size and weight, minimum driver age and an aging infrastructure. UPFRONT Solving the problem may be out of your control BY JEFF CRISSEY Entitlement, apathy compounding driver shortage JEFF CRISSEY is Editor of Commercial Carrier Journal. E-mail jcrissey@ccjmagazine.com.